Scrappy socialist Neil Clark is clapping his hands in glee at the economic woes befalling Wall Street - which is pretty typical, since Neil is one of Britain's leading champions of Schadenfreude.But does his take on the economic situation stand up to examination?
"We are now back in 1989- but the system that is collapsing before our very eyes is not Soviet communism, but Anglo-Saxon turbo-capitalism™. In the end, this most rapacious of economic models was destroyed by its own greed. It's time for everyone... ...to pop the champagne corks."
Greed, dishonesty and a very short-sighted agenda certainly contributed to the crisis on Wall Street - but they aren't exclusively to blame. Capitalism isn't the problem - the government's meddling is.
One such example is the Government's involvement in mortgage giants Frannie Mae and Freddie Mac - entities Neil Clark incorrectly identified as private industries. In reality, they were anything but.
The Federal National Mortgage Association (FNMA, hence 'Frannie Mae') and the Federal Home Loan Mortgage Corporation (FHLMC, hence 'Freddie Mac') are both Government Sponsored Enterprises - corporations created by the government and intricately linked to activities on Capital Hill.
Frannie Mae was created as part of Franklin D. Roosevelt's 'New Deal' in 1938 and was an entirely nationalised industry right up until 1968, when it was turned into a allegedly private corporation (enjoying a virtual monopoly on America's secondary mortgage market.)
Freddie Mac was created in 1970 to expand that market and offer competition to the newly privatised Frannie Mae. (No, two government sponsored companies in competition with each other doesn't make much sense to me, either.)
Despite being hypothetically privatised, both Freddie Mac and Frannie Mae enjoyed many things other private corporations didn't - including an unwritten reassurance that the securities it issued would be guaranteed by the Federal Government. What The Economist called; "the implicit government guarantee."
In addition to that, other private financial institutions had to maintain a capital/asset ratio of at least 3% to the mortgage backed securities they sold. Freddie and Frannie were exempt from that requirement, only having half as much cash to back those securities up.
The final icing on the cake? Both Freddie Mac and Frannie Mae were exempt from local and state taxes, giving them another massive advantage over 'real' private industry.
So Neil's suggestion that Freddie and Frannie were private corporations is pretty short sighted. They weren't - and that makes their collapse even more inexcusable.
Where did Freddie and Franny go wrong?
Neil Clark blames the entire collapse of Wall Street on the 'turbo capitalist' model (no, I have no idea what that means, either.)
With Freddie Mac and Frannie Mae, the blame can actually be directed towards politicians.
The management and accounting practices of Frannie Mae and Freddie Mac were known to be pretty shifty for at least a decade before their collapse.
The House Banking Subcommittee On Capital Markets, Securities And Government Sponsored Enterprises were holding hearings on Frannie Mae as early as 2000, to question how the companies were being run.
In 2001, the Bush administration called for more accountability because Frannie Mae and Freddie Mac posed 'a potential problem' because 'financial trouble of the large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity.'
In 2004, the Office of Federal Housing Enterprise Oversight published a report highlighting accounting 'errors' that shifted losses around the balance books so the senior executives could award themselves millions of dollars in bonuses.
The Bush government again called for more regulation: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and therefore…should be replaced with a new strengthened regulator.”
John McCain himself highlighted the crooked management back in 2006, telling George Bush: "Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management" to justify those enormous bonuses.
In 2003 and again in 2005, Bush's government tried to bring about legislation that would make the management of Freddie Mac and Frannie Mae more accountable and transparent - and both times, this legislation was shot down by Democrats in congress.
Why?
Because the Democrats received enormous campaign contributions from Freddie Mac and Frannie Mae to help make sure no legislation like that ever came into being - legislation which could have put an end to the Government sponsored cash-cow that allowed them to cook the books and rake in millions of undeserved bonuses.
The evidence is pretty clear: Did you know that Barack Obama raked in over $126,000 in campaign contributions from Freddie and Frannie? In just two years?
Or that Hillary Clinton collected over $75,000 herself?
Even House Speaker Nancy Pelosi - one of the most vocal opponents of Bush's legislation - took over $56,000 in campaign contributions from Freddie Mac and Fannie Mae.
What does this mean?
The disastrous collapse of Freddie Mac and Frannie Mae had very little do to with the capitalist system and a lot to do with two government backed organisations being driven into the ground by crony management.
The left-wing politicians who were meant to be rallying against such forces of 'unregulated capitalism' sat idly by and let all this all happen (counting the money they'd accepted to turn a blind eye.)
Neil Clark might blame 'turbo capitalism' for the Freddie and Frannie disaster - I think the opposite is true. These two mortgage giants illustrated the flaws in the socialist system he advocates. When a government monopoly is backed by taxpayer's money, the inevitable result is corruption and profiteering by the minority in charge.
Right now, the collapse of Freddie Mac and Frannie Mae has resulted in the American taxpayer being saddled with up to a trillion dollars in 'bailout' money - and the crooks who'd 'cooked the books' and walked off with millions in crooked bonuses?
Well, former Chairman and CEO of Frannie Mae, Franklin Delano Raines, is an advisor to Barack Obama's presidential campaign on economic matters.
In the capitalist system, a scandal like this would have resulted in criminal investigations that would have made those of Enron pale into insignificance.
But thanks to the pseudo-socialist system that supported Frannie Mae and Freddie Mac, the crooks who collected millions in bonuses (more than $20 for Franklin Raines) didn't get busted and imprisoned - they got recruited by the Democratic party to help with their election campaign.
["Turbo-capitalism" trademarked Neil Clark, 1996, all rights reserved. Quotes butchered and taken out of context to maximise effectiveness - Kitty Copy Editor]
